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Why Eylea Is Still Regeneron Pharmaceuticals' Most Important Drug

Aging baby boomers are turning 65 years old at a pace of 10,000 per day, and that's causing an increase in the diagnosis of common causes of vision loss, including age-related macular degeneration and diabetic macular edema. Patients with these conditions are increasingly being prescribed Regeneron Pharmaceuticals' (NASDAQ:REGN) Eylea, and as a result, Eylea's selling at a $6 billion annualized clip globally.

In this clip from the Motley Fool's Industry Focus: Healthcare podcast, analyst Kristine Harjes is joined by Todd Campbell to discuss Eylea's success and how Regeneron Pharmaceuticals' plans to maintain market leadership in these indications in the future.

A full transcript follows the video.

This video was recorded on Aug. 16, 2017.

Kristine Harjes: Regeneron just reported its earnings on August 3 -- we're talking about the second quarter here. In that quarter, it sold nearly a billion, just in the quarter alone. This is at nearly a $4 billion run rate just with U.S. sales. It's important to note that Regeneron receives just a share of profit from ex-U.S. sales because it's partnered with Bayer on this drug.

Todd Campbell: Right. Bayer and Regeneron are working together on commercializing the drug globally. This is a monster drug in a huge indication. I think you mentioned briefly that it's approved to treat wet stage age-related macular degeneration and diabetic macular edema. These are two increasingly common causes of vision loss within older patients. If you think about this for a second, what's the argument for the growth that you're referencing? You've got 76 million baby boomers, and they're turning 65 at a pace of 10,000 people per day. The incidence of these two indications within this patient population, as they're getting older and living longer, is increasing. What's really intriguing about Eylea and its success, this is a drug that did $1.5 billion in global sales last quarter alone. So, it has a $6 billion global run rate. That growth has come not because of price increases, but because it's being more increasingly used -- more patients are being diagnosed with these conditions, and then some market-share wins. There's other players. We'll talk about the competition, because I think that's important, too. I think this is an important drug. It's likely to remain an important drug for the company, especially given the fact that they have patent protection on the drug that stretches out into the 2020s.

Harjes: Right. When you look at the indications that it is approved for, you can see the demographic trends hidden in the name of the diseases. You have wet age-related macular degeneration, wet AMD, it's age related. As you mentioned, that's a huge growing population. Its other approved indication is diabetic macular edema. This is a diabetic condition, and the population of diabetics is also something that is growing. It's also approved for diabetic retinopathy in patients with diabetic macular edema. You can see exactly why this drug will continue to grow. You mentioned that it does have some competition. It's competing with a drug called Lucentis. There could potentially be some biosimilars to Lucentis, which are copycat versions of it that could be a little bit cheaper once the Lucentis patent expires in 2020. There's also an interesting competition going on between Lucentis and Eylea and Roche's drug called Avastin, which is a cancer drug that's being used off-label in this indication because it's so much cheaper.

Campbell: Yeah, it's way cheaper, and as a result, its market share is, I want to say it's 30%-40% in wet AMD.

Harjes: It's interesting. For me, it's one of the most high-profile times that we see an off-label drug being used across an indication with any sort of huge reach.

Campbell: And you take this one step further. You see Avastin being used so commonly, and that's eating up a big share of the market. Then you look at and say, wow, Eylea's sales are already $6 billion annualized, even though you have Avastin controlling so much of it. And then you throw Lucentis in the mix, and that's another $3 to $4 billion-a-year drug. This is a huge market -- it's getting bigger. I think the big question for Regeneron and for investors is going to be, can Regeneron maintain its market share over time as we get 10 years out against some of these other competing therapies? Maybe they're coming through the pipeline by companies like Allergan, which is working on wet AMD treatment, as well. I think the answer is ultimately going to be yes, Kristine. Bayer and Regeneron are teamed up on another combination drug where they're taking a brand-new drug and mixing it with Eylea. That's in mid-stage studies. If those late-stage studies end up panning out, theoretically you could transition over time off of Eylea to this other drug. I'm looking further out here, and anything can and will happen in clinical-stage trials, but I think it's important for investors to know that Regeneron is looking ahead. They recognize how important this indication is to their future financially, and they're taking some steps to try ensure themselves up long term.